This article originally appeared on NJ Spotlight.
Hundreds of jobs that were created in Camden in recent years would have instead gone to places like Indiana, Missouri and Pennsylvania if it weren’t for state tax-incentive programs, several corporate executives told state lawmakers yesterday.
That testimony led off a lengthy hearing in Trenton, where proponents of tax breaks that have faced heavy scrutiny in other venues this year were offered a chance to cast them in a more positive light.
Tom Doll, president and chief executive of Subaru of America, Inc., said that New Jersey’s reputation for levying high income and property taxes was closely considered as his company evaluated where to locate a new facility. Ultimately, they opted for Camden, one of the nation’s poorest cities.
“The costs of doing business in New Jersey are quite high,” said Doll, adding that some company officials wanted to take the jobs to Indiana.
EDA as ‘deciding factor’
“When the New Jersey EDA came through with their (incentive) package, that was the deciding factor,” Doll said.
Susan Story, president and chief executive of American Water Works, said her company’s experience was much the same.
“We did a detailed analysis,” Story said of alternative sites in Missouri and Pennsylvania before going with Camden.
“There was a significant difference because of the (New Jersey) tax-incentive program,” she said.
According to Camden County Freeholder Jon Young, “The bottom line is we are employing Camden city residents because of what’s happening in the city, and I think that’s the most important thing about it.” He added, “We’re changing lives.”
Yet at several points during the hearing, some lawmakers were wondering aloud whether programs put in place during the depths of the Great Recession should be significantly reformed — which is something Gov. Phil Murphy has been calling for — or just updated with modest tweaks as some witnesses suggested yesterday.
“I think you take a really close look, and a deep dive, and you make the legislative adjustments where there is room to make the adjustments, within reason,” said Dana Redd, a former state senator and former mayor of Camden.
The debate over the future of the state’s tax-incentive offerings reached a stalemate this summer after Murphy, a first-term Democrat, refused to enact legislation that passed both Assembly and Senate on a bipartisan basis. Its goal was to extend tax-break programs that had been overhauled and reauthorized for five years during the tenure of former Republican Gov. Chris Christie.
Those programs, administered by the state Economic Development Authority, came under fire earlier this year after the Office of the State Comptroller issued an audit that raised serious questions about whether companies have been able to profit without living up to job-creation or investment standards set in state law. Among other findings, the audit questioned the documentation submitted by companies for nearly 3,000 jobs that were reported to have been created or retained in exchange for tax breaks going back over a decade.
Murphy also convened a task force to investigate whether any wrongdoing had occurred, and that panel has issued at least one criminal referral as part of its ongoing probe.
But lawmakers have also been holding a series of hearings as they conduct their own review of the incentive programs, with the latest coming yesterday. (A final report and draft legislation are expected later this year.)
Taking taxes into consideration
One of the issues put up for discussion by the Senate Select Committee on Economic Growth Strategies was the role the state tax rates play in the decision-making process for corporate leaders. During an earlier hearing, several leading policy experts suggested taxes are not a significant factor and also questioned the effectiveness of tax incentives as an economic-development strategy.
Sen. Joseph Lagana (D-Bergen) said it was also important to get input yesterday from the corporate community.
“I think sometimes you need to speak to the business leaders and say ‘What are you looking for exactly’ because I think you probably want to tailor tax-incentive program around what their needs are,” Lagana said.
However, as a result of the ongoing political stalemate in Trenton, the EDA can no longer accept applications from companies seeking tax breaks in exchange for meeting specific hiring or investment goals. That’s led to concerns that the Garden State won’t be able to compete for the same types of jobs as neighboring states like Pennsylvania and New York, which continue to maintain their own tax-break programs.
Murphy has proposed a series of economic-development policy changes, and while his reforms would continue tax-incentive offerings, they would be geared toward specific goals like brownfields redevelopment and historic preservation. He is also seeking to cap the amount of revenue that can be allotted to the incentives each year to cushion their impact on the state budget, which by some estimates could already be as much as $11 billion.
Last week, several liberal groups, including New Jersey Policy Perspective and New Jersey Working Families, suggested that lawmakers should be moving forward with the adoption of tax-incentive reform. And for them, yesterday’s testimony showing a different side of the issue didn’t move the needle one bit.
“The facts remain that New Jersey’s corporate subsidies are a national outlier, as the state spends way more than it should for every job created,” said NJPP senior policy analyst Sheila Reynertson.
“This is a failed approach to economic development,” she said.